The European Commission proposes a ban on unjustified geo-blocking

Last year the Commission published a Digital Single Market Strategy for Europe, outlining, amongst other things, proposed steps towards the creation of a seamless market for the online sale of goods and services within the EU. Please see our Commercial Update of May this year for more information.

The Commission has now published, as part of a new legislative package, a draft regulation to address unjustified geo-blocking and other online forms of discrimination on the grounds of nationality, residence or establishment.

The Commission’s proposed geo-blocking regulation aims to ensure that customers seeking to buy products and services in another Member State, whether online or in person, do not experience any discrimination in terms of access to prices, sales or payment conditions, unless this is objectively justified. The geo-blocking regulation sets out the following proposals:

It bans the blocking of access to websites and the use of automatic re-routing based on the territory from which a website has been accessed. The Commission considers that this measure will increase price transparency as customers will be able to access different national websites.

Companies are free to accept any means of payment they wish, however the proposed regulation requires companies not to discriminate within these means of payment. This means that, for example, if a company in Germany accepts Maestro cards from Germany, it has to accept a Maestro card from any other Member State. However, if it does not accept Maestro cards from Germany then it does not have to accept Maestro cards from other Member States.

The regulation also sets out specific circumstances in which geo-blocking and other forms of discrimination based on the location, nationality or residence of the customer cannot be justified. Any geo-blocking or geographically-based discrimination in the following scenarios will only be permitted where a national or EU legal requirement obliges the company to block access to the product or service (for example, a ban on the sale of alcohol to non-residents):

When a customer buys a product which the company does not deliver cross-border to the customer’s home member state, that customer is entitled to delivery in the country of the company in the same way as a local customer would be. That foreign customer should be entitled, for example, to collect the product from the company’s premises or arrange delivery themselves.

The proposed regulation stipulates that when a customer buys an electronically delivered service, for example cloud computing, data warehousing or website hosting services, then a foreign customer should not be obliged to pay any additional fees compared to a local customer. This provision does not apply to non-audiovisual content (such as e-books and music) protected by copyright (although the non-application of this provision is subject to review two years after the regulation enters into force).

The proposed regulation states that when a customer buys a service which is supplied in the premises of the company, or in a physical location where the company operates, then the price available to a local customer must also be available to any foreign customers.

The regulation also provides that any agreements containing restrictions on passive sales which would lead to breach of the new rules will be automatically void. The Commission states that this is intended to prevent circumvention of the new rules.

The proposed regulation includes certain carve-outs:

In order to avoid introducing a disproportionate burden on companies, the proposed regulation does not oblige companies to deliver across the EU and certain businesses that fall below a national VAT threshold are exempt from certain provisions.

Certain services are excluded from the scope of the regulation, including non-economic services of general interest, transport services, audiovisual services (such as films and television programmes), gambling activities, healthcare services and certain social services.

In addition, as mentioned above there is a carve-out for non-audiovisual works protected by copyright.

The regulation has been proposed by the Commission and needs to be agreed by the European Parliament and the European Council before being adopted. It is therefore subject to negotiations, which may take time, although the Commission expects that the proposed regulation will take effect in 2017. However, the Commission has said that the rules relating to electronically-supplied services (i.e. cloud computing, data warehousing or website hosting services) will not enter into force until 2018.